Record Food Network Ratings Ease Pain of Cablevision Blackout

Food Net Advertisers Don't Need Make-Goods So Far

LOS ANGELES (AdAge.com) -- The ongoing dispute over subscription fees between Cablevision and Scripps' HGTV and Food Network has upset a lot of customers, but it hasn't hurt advertisers -- yet.

'Super Chef Battle: An Iron Chef America Event' Credit: Food Network
HGTV and Food Network went dark on Cablevision last weekend, just as Food Network was prepping one of its biggest nights of programming on Jan. 3. The loss of 3.1 million customers in the New York, New Jersey and Connecticut area should have cut the audience numbers for "Super Chef Battle: An Iron Chef America Event," featuring First Lady Michelle Obama, and "America's Worst Cooks." But the Sunday telecasts instead produced the most-watched night in Food Network history, attracting 7.6 million and 4 million total viewers, respectively. HGTV's "2010 Dream Home Tour" also beat the ratings for its 2009 edition.

Normally when TV shows don't air during their scheduled time slots or attract the ratings guaranteed to advertisers, networks are forced to offer up "make-goods" or cash back to advertisers to account for the missing eyeballs. But because the two Jan. 3 programs out-rated the network's most bullish ratings projections even without Cablevision viewers, Steve Gigliotti, Scripps' exec VP-ad sales, didn't have to give any money back to sponsors such as BMW, Procter & Gamble and Welch's.

"For the short term, we promise a demographic guarantee to different advertisers based on who they're trying to reach -- it could be women 18 to 34, or adults 25 to 54," Mr. Gigliotti explained. "We still have 60% coverage in New York, so there's no traditional place here where there needs to be a make-good as long as you deliver the total number."

And for any Cablevision viewers who missed the shows, Food Network will re-air "Super Chef Battle" Jan. 10 on New York's WPIX-TV. HGTV is also re-airing its "2010 Dream Home Tour" on WPIX Jan. 8.

Broader implications for cable
As talks between Cablevision and Scripps remain at a standstill, the debate on the value of cable content is gaining more complexity. Viacom and Time Warner Cable had a similar scuffle last year in which Viacom threatened to pull Nickelodeon, MTV and other networks off the air by New Year's Day if Time Warner Cable didn't agree to the increased subscription fees they felt were owed them. Time Warner Cable called Viacom's bluff, arguing that MTV Networks had been giving away many of its biggest shows for free online and undermining their value to the cable company.

Food Network and HGTV don't stream full-length episodes of their shows online but nevertheless feel their content is worth more of a premium than Cablevision was willing to pay -- as evidenced by Food Network's record ratings the first night of the Cablevision blackout.

The Cablevision kerfuffle has also renewed the conversation over a la carte cable, as consumers start to demand to pay for programming they want to watch rather than the bundled packages now standard. A class-action lawsuit against cable programmers was dismissed in Los Angeles last year, so outstanding legal issues will likely prevent single-channel billing from happening any time soon. But if cable a la carte were a reality, it would completely change the cable TV revenue model. The typical cable network relies on advertising to support 40% to 50% of its revenue -- and counts on channel surfers flipping through massive channel guides for a good chunk of the ratings that underpin that ad revenue.

The current Cablevision dispute with Scripps has also presented an opportunity for Verizon Fios, which reported a 300% increase in customer-service calls in the Long Island area the week Scripps went off the air, a sign that Cablevision could lose subscribers as the contract negotiations continue.

Mr. Gigliotti, for one, has no direct role in the Cablevision talks, but hopes they get resolved soon -- even if the dispute is immaterial to the networks' ratings in the short term.

"If you had a network that was fairly new and you were still branding and developing, this would be a real tough issue because no one in the New York ad community could see what you're doing," Mr. Gigliotti said. "Our networks HGTV and Food are 15 years old and fairly well known in New York so it's less of an issue."